The grain markets have been on a bull run for the last several months, with futures prices hitting multiyear highs. Corn in early February 2021 hit a seven-year high, with soybeans scoring six-year highs. The move took many in the industry by surprise, given that grain prices in the spring of 2020 had hit new contract and multiyear lows at the height of the COVID-19 pandemic.
As the pandemic began the spring of 2020, the demand picture had looked dismal. The corn market was crushed as roughly 50% of the ethanol plants in the United States went offline in mid-April as the nation went into lockdown and gas demand came to a screeching halt. That was followed by the U.S. Department of Agriculture's predictions for increased corn acreage of 97 million acres in the June 2020 WASDE Report, with production of 15.995 billion bushels and record corn ending stocks at 3.323 billion bushels.
Soybean ending stocks looked more manageable in the June report at 395 million bushels. However, with African swine fever destroying more than half of China’s hog herd, the outlook for soybean demand was threatened, despite the signing of the phase one trade agreement. Add to that the prospects for record crops in South America and cooperative weather helping farmers to plant their crops at a near record place in the U.S.
"We started selling our beans at $8.20 and we got all the way up to $9.50 before we had the last of them gone. Same way with corn, we don't have a kernel of anything left on the farm."
- Bob Worth
Daniel Fixsen, a Wabasso, Minn., farmer, said he totally missed out on the rally.
“Well, most of our beans were sold off the combine this fall, that was different. Normally we wait till the summer,” he said.
Bob Worth of Lake Benton, Minn., said his farm did some scale up selling, but they still sold most of their crop too early. While they made a profit, they still left money on the table.
“We started selling our beans at $8.20 and we got all the way up to $9.50 before we had the last of them gone," he said. "Same way with corn, we don't have a kernel of anything left on the farm.”
By the end of June, things started to change in the markets. In USDA’s June 30, 2020, Acreage Report, corn acreage was cut by nearly 5 million acres, to 92 million acres, which was a huge surprise to the trade.
That was followed by production problems including the flash drought in the western Corn Belt. Western Iowa was hit the hardest, which cut corn and soybean yields. However, the bigger production cut came from the historic derecho that hit Iowa in mid-August, flattening corn and taking several million bushels of corn production off the balance sheets.
However, the biggest factor was the robust demand that started to kick in in August, with big export sales of corn and soybeans to China. This jump started a parabolic rally in soybean prices that caught nearly everyone off-guard. Unfortunately, many farmers had already marketed their soybeans prior to or at harvest, well before the majority of the rally started. It was estimated nearly 80% of soybeans were sold before the largest part of the rally took place.
Now producers are watching new crop grain futures and trying to decide when and if they should start selling ahead or wait, especially with looming drought in the back of their minds. Jordan Scott and his father Kevin farm near Valley Springs, S.D. They have been doing a few new crop sales with prices above year-ago levels.
“It might be a good point to look ahead and make some sales. We’ve sold a little ahead, nothing crazy, but we’re looking to the future,” Scott said.
During the last week of February, both new crop corn and soybeans hit new contract highs. As a result, that put the February Crop Insurance Base Prices at $4.58 for corn and $11.87 for soybeans, while spring wheat averaged $6.53. These prices are well above a year ago and hopefully an indication farmers will be able to market at even more profitable levels in 2021 than they did in 2020.